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Posts Tagged ‘redistribution’

In my last post, I said “total net social spending” included net public spending and mandatory private social spending. In fact, it includes voluntary private social expenditures as well. The U.S. has by far the highest voluntary social expenditures in the OECD, so if you subtract those out, the U.S. net public and mandatory private social spending figure is no longer second in the OECD (and thus almost certainly the world, as poorer countries have smaller welfare states), only just about average.

But what does voluntary private social spending include? One big component is employer-provided health insurance. It seems to me that should be included in the size of the U.S. welfare state, even if it is not directly provided by the government, because the government subsidizes it (through the tax code), and because that spending is a substitute for government spending in other countries. If we exclude it for the U.S., we are not comparing like with like, since several other countries provide health insurance mainly or exclusively through the state. Put another way, if the U.S. provides so much social welfare privately, the need for the government to provide it is less. The U.S. welfare state is average-sized in spite of the fact that the private welfare system is enormous.

Now, does that mean the U.S. spends vastly more on the poor than most other OECD countries? Not necessarily. The majority of social spending in the U.S. does not go to the poor – but neither does it anywhere else. The elderly soak up a huge portion of social spending in almost all advanced industrial societies. Indeed, one way to measure how redistributive the U.S. welfare state is is to subtract the “post tax and transfer” Gini ratio from the “pre tax and transfer” Gini ratio. Of course, this is a static measure that does not take into account possibilities for mobility from one income level to another, and the extent to which “poverty traps” can contribute to lost mobility. Still, it’s a suggestive measure.

Using data from World Development IndicatorsStandardized World Income Inequality Database, I find that the tax and transfer system in the U.S. shaves only 0.08 points off the Gini ratio, a standard measure of income inequality (“1″ means most unequal, “0” perfectly equal). In most other countries, the number is much higher. In Sweden, it is 0.20. In Italy and Germany, is 0.21. Only Switzerland showed (slightly) less progressive redistribution.

So while the U.S. has one of the very largest welfare states in the rich world, it also has one of the least progressive welfare states in the rich world. By the standards of anti-inequality preferences, that’s a terrible record of inefficiency.

The United States has long had a larger welfare state than most other Western democracies. Surprised? You may not be aware of the new research on “net social spending.”

Net social spending includes not just government expenditures on social programs, but also tax credits for social purposes and, as a debit, government taxation of social benefits. It turns out that many of the so-called “generous” European welfare states tax social benefits at a high rate. Meanwhile, the United States uses the tax code to help the poor, through the Earned Income Tax Credit. We should also include mandatory private social payments, which are not directly paid by the government.

Using the OECD data, I have plotted total net social expenditure over time for 26 rich countries (click the image to zoom in).

As of 2009, the United States had the second largest welfare state in the world, at 28.8% of GDP. Only France, at 32.1%, had a bigger one. Moreover, while all advanced industrial societies show a growth in the welfare state from 2005 to 2009, due to economic conditions, the U.S. also had a big runup in welfare spending between 1999 and 2007. In 1995, U.S. net social spending stood at just 22.7% of GDP, although even that figure was higher than those for Denmark, Canada, Italy, Norway, Australia, Ireland, and South Korea. So far as we have data, the U.S. has always had a larger-than-average welfare state.

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Andrew Breitbart has posted a video (HT: Phil Arena) showing liberal, pro-income-redistribution students rejecting out of hand the concept of redistributing grade point averages (GPAs) from the best-performing students to those less fortunate, saying things like “It’s not fair” and “I worked for my grades.” Does their position constitute hypocrisy, and does this experiment show that something like the libertarian conception of property rights (“from each as she chooses, to each as she is chosen”) is somehow more “natural” to us humans? One argument might go something like this: Being committed to income redistribution requires being committed to redistribution of grades. Being committed to redistribution of grades is unlikely to be justified. Therefore, being committed to income redistribution is unlikely to be justified.

To put some flesh onto the problem, it’s useful to narrow down possible justifications for redistribution, so I’ll focus on John Rawls’ Difference Principle, which states that all inequalities in a society must work to the advantage of the representative least well off person in that society. In other words, the baseline assumption should be perfect equality, and deviations from equality (in income, wealth, prestige, and anything that might constitute “social bases of self-respect”) have to be justified by their benefit to all. One common objection (see, e.g., Lomasky’s Persons, Rights, and the Moral Community) to Rawls’ Difference Principle is that it would require the more physically attractive or talented to compensate the less attractive or talented. Rawls’ prior Equality Liberty Principle potentially prohibits actual redistribution of body parts, but Rawls is certainly open to redistribution of wealth from those who enjoy psychic benefits from their natural abilities and characteristics to those who are less well off psychically. There is nothing in Rawls’ Difference Principle that limits unjust inequalities to uncompensated financial inequalities.

Breitbart’s experiment seems to me to raise similar concerns. One’s intelligence and hard work may yield financial rewards, but they also yield psychic benefits. Obtaining a high GPA confers prestige, status, and a greater sense of self-esteem. No one “deserves” intelligence or a penchant for hard work, since these are things we’re either born or raised with. So should GPAs be redistributed? One might object on practical grounds. Redistribution of GPAs might discourage student effort (but redistribution of income also discourages worker effort). Redistribution of GPAs might interfere with correct productivity assessments in the marketplace (but so might redistribution of income, since it is always accomplished through a highly complex tax code). Even if these practical objections decide us against redistributing grades, if we are committed to the Difference Principle, we must remain in principle committed to compensating those who earn lower GPAs for their “unfair” disadvantages (perhaps financially). If we find this conclusion absurd, then so must we find the Difference Principle.

This post concludes a series of posts on the topic of “American exceptionalism.” In my last look at the topic several weeks ago, I argued that one conception of American exceptionalism among conservatives – the idea that the United States is uniquely free or has a particularly small government due to its culture – is mostly mistaken. In fact, while the U.S. does have a relatively small government by high-income democratic standards, that relative smallness can be explained more or less entirely by its fiscal-federal institutions, which are also shared by Canada and Switzerland (and Switzerland has a much smaller government than the U.S.). In this post, I take aim at a conception of American exceptionalism more widespread on the left, the idea that the U.S. is uniquely sinful in its degree of inequality. To a significant degree this premise on the left mirrors the premise on the right of uniquely small government: the cost of that small government, it is argued, is more inequality.

The problem with the claim is simple: comparing the U.S. to Europe on inequality is inappropriate because (more…)

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The distinguishing characteristic of classical liberalism from other liberalisms is its view of property rights. On the classical liberal account, a distribution of property is just if it is a consequence of just transfer, where transfer is generally just if and only if voluntary or appropriately compensatory for wrongs. As Nozick noted, this unpatterned, “side constraints” view of justice differs from the patterned, “end-state” view of justice found in Rawls, for whom property should be redistributed as necessary to maximize the position of the “representative least advantaged person.”

Nozick did not address the issue of how property may legitimately be acquired in the first place. Locke believed that just acquisition occurred through “mixing one’s labor” with the earth. Locke also had a famous proviso, that just acquisition must leave “enough and as good” for others, to avoid waste. (However, at one point in the Second Treatise Locke seems to argue that the proviso becomes a dead letter once a society invents money.)

Nozick argues that the initial distribution does not matter, because “liberty upsets patterns.” He makes this point with the famous Wilt Chamberlain example. Imagine a world in which everyone has exactly equal resources. Now suppose that one man, Wilt Chamberlain, is exceptionally talented at basketball. People will come to watch Wilt Chamberlain play basketball and will voluntarily transfer a small sum, say $0.25, to him for this privilege. Very quickly, the old pattern of equality disappears as Wilt Chamberlain accumulates resources. To re-establish that pattern would require undoing the voluntary transfers that people have made to Wilt Chamberlain.

But is Nozick necessarily right that initial distribution doesn’t matter? What about property rights in land? If one person establishes control over a vast range of productive land, then on standard libertarian accounts the owner may require virtually any conditions (s)he might like in exchange for allowing others access to that land. Thus, the landowner may require would-be tenants to yield one-third of the value of their production and perhaps to make themselves available for security duty as well. By enjoying the fruits of others’ labor, the landowner is able to continue in enjoyment of the demesne and pass it down to future generations to do the same.

Are absolute property rights in land a road to serfdom? Or may property rights occasionally be set aside for other interests? If we allow that property rights are not always absolute, does our theory collapse into utilitarianism or egalitarianism, or can we build theoretical terraces on that slippery slope?

Nozick’s own theory has some intellectual resources to address this problem. Nozick adapts the Lockean Proviso to argue that appropriations may be set aside when they literally make others with access to them worse off than they would have been had the resource remained unowned and open-access. “Setting aside” the appropriation presumably means that current distributions may also be altered, perhaps temporarily.

Consider the following two scenarios. The first comes from a debate in Liberty magazine a number of years ago; the second comes from is rather like a discussion I recall from David Friedman’s book The Machinery of Freedom (corrected per David Friedman’s comment below).

Scenario A

Scenario B

You fall from a window of one of the top stories of a tall building. As you hurtle toward certain death, you reach out and grab a flagpole sticking out of another window, breaking your fall. The owner of the flagpole observes you clinging on for dear life and says, “I am the owner of that flagpole; let go!”

Should you let go?

In this scenario, you are the neighbor of a mad scientist who likes to sample the atmosphere around your house and test for the presence of the DNA of other humans. He knows that you and other neighbors will sometimes pass his house or breathe in its general direction, and as a result microscopic molecules containing their DNA float over his property line, invading his property. As an extreme hypochondriac, he cannot bear the thought of this happening.

He issues a decree to the entire neighborhood, including you: No one is to venture outside and exhale, and even exhaling indoors is risky, because the microscopic particles could find their way out of chimneys and other crevices and onto his property. If anyone’s DNA is found on his property, he threatens to defend himself from the trespass by all legitimate means.

Do you have a moral obligation to stop breathing?

Presumably anyone not blinded by ideology will answer “no” to these questions, conceding that property rights are not absolute. In the former case, at the moment of your hanging to the flagpole by dear life, the scheme of private property rights makes you worse off. Thus, by Nozick’s standard, it seems you have the right to expropriate the use of the flagpole until you no longer need it. At that point, let us surmise, the flagpole should revert to its original owner, and you should make compensation for any damages to it. In the second scenario, the mad scientist is engaging in illegitimate expropriation by trying to force other people to stop breathing, which would make them worse off than they would be if the scheme of private property rights did not exist.

This application of the Proviso is attractive because it imports some utilitarian-esque concerns (the scheme of private property rights must make everyone better off than they would be in the primeval world of open-access commons), while retaining the intuitively desirable features of libertarianism, most notably the right to dispose of your property as you see fit under almost all circumstances. Nevertheless, it requires giving up the fiction of absolute property rights and perhaps even opens the door to a kind of universal income guarantee as compensation for the private appropriation of land. Enter the left-libertarianism of Michael Otsuka, Hillel Steiner, Peter Vallentyne, and Philippe Van Parijs.

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